Ashok Ramdas Sonawane, Malegaon V. Income-tax Officer,

ITA 187/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1574 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDER
• Keywords: Sale consideration of property below Jantri Value; Income from undisclosed sources; Bonafide belief
• Section: 50C; 54F; 54

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.187/PN/2016 % % / ASSESSMENT YEAR : 2010-11 ASHOK RAMDAS SONAWANE, ASHOKA TAILORS, FIRST FLOOR, CITY BAZAR, RAM SETU, MALEGAON 423 203 PAN NO.ADLPS2552F . / APPELLANT V/S ITO, WARD-1, MALEGAON . / RESPONDENT / APPELLANT BY : NONE (WRITTEN SUBMISSION) / RESPONDENT BY : SHRI ABHIJIT HALDER / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01-12-2015 OF THE CIT(A)-I, NASHIK RELATING TO THE ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF TAILORING UNDER THE NA ME AND STYLE OF ASHOK TAILORS. HE FILED HIS RETURN OF INCOME ON 12-07-20 10 DECLARING TOTAL INCOME OF RS.2,92,972/- AND AGRICULTURAL INCO ME OF / DATE OF HEARING :12.07.2016 / DATE OF PRONOUNCEMENT:14.07.2016 2 ITA NO.187/PN/2016 RS.82,892/-. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE AO OBSERVED THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AT RS.1,593/- ON SALE OF PLOT NO.7, SURVEY NO.50 A+B SANGAMESH WAR, MALEGAON ON 22-12-2009. WHILE THE ASSESSEE HAS ADOPTED THE SALE CONSIDERATION FOR COMPUTATION OF LONG TERM CAPITAL GAIN AT RS.6,20,000/- AS PER THE SALE DEED, HOWEVER, THE AO NOTED THAT THE VALUATION AS PER STAMP DUTY PURPOSE WAS RS.9,15,000/-. H E ACCORDINGLY ADOPTED THE CONSIDERATION AS PER SECTION 50 C AT RS.9,15,000/- AS AGAINST RS.6,20,000/- ADOPTED BY THE ASS ESSEE AS THE SALE CONSIDERATION. THE AO FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S.54 AT RS.4 LAKHS AS INVESTMENT IN CA PITAL GAINS ACCOUNT. ACCORDING TO THE AO, SECTION 54 OF THE I. T. ACT IS NOT APPLICABLE IN CASE OF THE ASSESSEE AS THE PROPERTY SOLD W AS NOT USED BY THE ASSESSEE FOR HIS RESIDENCE. FURTHER, PROVISIONS OF SECTION 54F ARE ALSO NOT APPLICABLE IN CASE OF THE ASSESSEE BECAUSE O N THE DATE OF TRANSFER THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL H OUSE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO DETERMINED THE LONG TERM CAPITAL GAIN AT RS.6,96,593/-. 3. THE AO FURTHER NOTED THAT ASSESSEE HAS SHOWN AGRIC ULTURAL INCOME AT RS.82,892/- AND THE SAME HAS BEEN CREDITED TO HIS CAPITAL ACCOUNT. ACCORDING TO THE AO, THE ASSESSEE MUST HAVE INCURRED CERTAIN EXPENSES FOR EARNING THE AGRICULTURAL INCOME. REJ ECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO HELD T HAT 30% OF THE AGRICULTURAL INCOME DECLARED IS TOWARDS THE EXPENSES FOR EARNING THE SAME AND THE ASSESSEE HAS INCURRED SUCH EXPENDITU RE FROM HIS UNDISCLOSED SOURCES. HE ACCORDINGLY MADE ADDITION OF RS.24 ,867/- BEING INCOME FROM UNDISCLOSED SOURCES FOR MEETING THE EXPE NSES REQUIRED FOR EARNING THE AGRICULTURAL INCOME. 3 ITA NO.187/PN/2016 4. SUBSEQUENTLY, THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT. REJECTING THE VARIOUS EXPLANAT IONS GIVEN BY THE ASSESSEE THE AO HELD THAT ASSESSEE FURNISHED INA CCURATE PARTICULARS OF INCOME IN RESPECT OF THE LONG TERM CAPITAL GA IN ON SALE OF PLOT AS WELL AS NOT SHOWING THE EXPENDITURE REQUIRED FOR E ARNING THE AGRICULTURAL INCOME AND THEREFORE THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. HE ACCORDINGLY LEVIED P ENALTY OF RS.1,50,000/- U/S.271(1)(C) OF THE ACT. 5. IN APPEAL THE LD.CIT(A) DELETED THE PENALTY ON ACCOUNT OF THE PORTION OF THE LONG TERM CAPITAL GAIN WHICH RELATES TO THE DIFFERENCE BETWEEN THE ACTUAL CONSIDERATION RECEIVED AND THE VALUE U/S.50C OF THE I.T. ACT. HOWEVER, HE SUSTAINED THE PENALTY ON ACCO UNT OF DISALLOWANCE OF EXEMPTION CLAIMED U/S.54 OF THE I.T. ACT AM OUNTING TO RS.4 LAKHS AND THE ADDITION ON ACCOUNT OF UNEXPLAINED AGRIC ULTURAL EXPENDITURE OF RS.24,867/- 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, A WRITTEN SUBMISSION HAS BEEN FILED WITH A REQUEST TO CONSIDER THE S AME WHILE DECIDING THE APPEAL. 8. SO FAR AS THE PENALTY LEVIED ON ACCOUNT OF DISALLOWANCE OF EXEMPTION OF RS.4 LAKHS CLAIMED U/S.54 OF THE ACT IS CONCERN ED, IT HAS BEEN MENTIONED IN THE WRITTEN SUBMISSION THAT THE ASSESS EE CLAIMED THE SAME UNDER BONAFIDE BELIEF THAT THE EXEMPTION U/S.54 O F THE ACT IS AVAILABLE TO THE ASSESSEE AS HE HAS MADE ADVANCE FOR PU RCHASE OF HOUSE PROPERTY. IT HAS BEEN MENTIONED THAT THE ASSES SEE DOES NOT 4 ITA NO.187/PN/2016 KNOW THE INTRINSIC PROVISIONS OF LAW AND WAS FULLY DEPENDING ON HIS CONSULTANT FOR PREPARATION AND FILING OF THE RETURN OF INCOME . FULL DETAILS IN RESPECT OF THE IMPUGNED EXEMPTION WERE ALSO FUR NISHED BY THE ASSESSEE BEFORE THE AO AND THE DISALLOWANCE HAS BEE N MADE ON THE BASIS OF THE SUBMISSION MADE BY THE ASSESSEE. THERE IS NO CONCEALMENT OF ANY PARTICULARS OF INCOME OR FURNISHING OF INA CCURATE PARTICULARS OF INCOME. FURTHER, WHAT IS TAXED IS NOT INCOM E BUT JUST DISALLOWANCE OF CLAIM OF EXEMPTION WHICH WAS CLAIMED UNDER BON AFIDE BELIEF THAT THE SAID EXEMPTION IS AVAILABLE. 9. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMT. NEETU DUTTA REPORTED IN 35 TAXMANN.COM 4 54 IT IS MENTIONED IN THE WRITTEN SUBMISSION THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE ASSESSEE TREATED CAPITAL GAIN THAT RESULTED ON ACCOUNT OF SALE OF SHARES VESTED WITH H ER PURSUANT TO EXERCISE OF EMPLOYEES STOCK OPTION AS LONG TERM CAPITAL G AIN AND DID NOT INCLUDE THE SAME IN HER RETURN, PENALTY U/S.271(1)(C) IS NOT LEVIABLE SINCE THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS A ND HAD CLAIMED EXEMPTION U/S.54F BASED ON LEGAL ADVICE THAT GAINS FROM EXERCISE OF ESOP WOULD NOT BE TAXED. THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODU CTS PVT. LTD. REPORTED IN 322 ITR 158 AND IN THE CASE OF PRICE WATERH OUSE COOPERS PVT. LTD. VS. CIT VIDE CIVIL APPEAL NO.6924/2012 ORDER DATED 25-09- 2014 ARE ALSO RELIED UPON IN THE WRITTEN SUBMISSION STATIN G THAT THE HONBLE SUPREME COURT IN THE SAID DECISIONS HAS HELD THA T CONCEALMENT PENALTY IS NOT LEVIABLE WHEN THE CLAIM WAS MADE UNDER BONAFIDE BELIEF. 5 ITA NO.187/PN/2016 10. SO FAR AS THE PENALTY LEVIED ON ACCOUNT OF DISALLOWANCE OF 30% OF AGRICULTURAL INCOME BEING AGRICULTURAL EXPENSES IS CONCERNED , IT HAS BEEN SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE AO ASKED FOR THE DETAILS OF AGRICULTURAL INCOME, DETAILS OF GRO SS RECEIPT, DETAILS OF EXPENSES INCURRED ETC. THE ASSESSEE IN RESPONSE TO THE SAME HAS SUBMITTED THAT THE AGRICULTURAL INCOME OF RS .82,892/- SHOWN IN THE RETURN OF INCOME IS NET OF EXPENSES AND THE ASSESSEE HAS NOT MAINTAINED ANY DETAILS OF THE EXPENSES INCURRED BECAU SE SUCH AGRICULTURAL LAND WAS GIVEN FOR CULTIVATION TO SALDAR WHO WA S CULTIVATING THE LAND ON BEHALF OF THE ASSESSEE AND GIVING TH E SHARE IN THE TOTAL OUTPUT AFTER MEETING THE EXPENSES TO THE ASS ESSEE. IT HAS BEEN SUBMITTED THAT THE AO WITHOUT APPRECIATING THE FACT S PROPERLY HAS MADE THE ADDITION AND THEREAFTER LEVIED THE PENALTY. ALTHOUGH THE ASSESSEE HAS NOT CHALLENGED THE ADDITION IN QUANTUM APPEAL, HOWEVER , PENALTY PROCEEDINGS BEING DISTINCT AND DIFFERENT FROM ASSESS MENT PROCEEDINGS THE PENALTY SHOULD BE DELETED. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). HE SUBMITT ED THAT THE ASSESSEE HAS CLAIMED WRONG EXEMPTION OF RS.4 LAKHS U/S.54 OF THE ACT ALTHOUGH HE IS NOT ENTITLED TO SUCH CLAIM. FURTHER, THE A SSESSEE BY NOT DISCLOSING THE EXPENDITURE FOR EARNING THE AGRICULTURAL INCOM E HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURA TE PARTICULARS. THEREFORE, THE LD.CIT(A) HAS RIGHTLY SUSTAINED THE PENALTY ON ACCOUNT OF DISALLOWANCE OF EXEMPTION U/S.54 AND ADDITION ON ACCOUNT OF UNEXPLAINED AGRICULTURAL EXPENDITURE OF RS.24,867/ -. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE U PHELD AND THE GROUNDS RAISED BY THE ASSESSEE BE DISMISSED. 6 ITA NO.187/PN/2016 12. WE HAVE CONSIDERED THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALS O HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND IN THE INSTANT C ASE THE ASSESSEE HAS DECLARED THE LONG TERM CAPITAL GAIN OF RS.1,5 93/- ON ACCOUNT OF SALE OF PLOT WHERE THE SALE CONSIDERATION WAS S HOWN AT RS.6,20,000/-. THE ABOVE CAPITAL GAIN WAS DETERMINED AFTER CLAIMING EXEMPTION OF RS.4 LAKHS U/S.54 OF THE I.T. ACT. WE FIND THE AO SUBSTITUTED THE SALE CONSIDERATION AT RS.9,15,000/- WHICH IS THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY AS PER PROV ISIONS OF SECTION 50C. SIMULTANEOUSLY THE AO HELD THAT THE ASSESS EE IS NOT ENTITLED TO CLAIM DEDUCTION U/S.54 ON ACCOUNT OF INVESTMENT IN CAPITAL GAIN ACCOUNT SINCE THE SAME IS NOT APPLICABLE TO THE ASSE SSEE AS THE PLOT SOLD BY THE ASSESSEE WAS NOT USED FOR HIS RESIDENCE . HE FURTHER HELD THAT THE PROVISIONS OF SECTION 54F ARE ALSO NOT APPLIC ABLE TO THE ASSESSEE SINCE HE OWNS MORE THAN ONE HOUSE. FURTHER, THE AO ALSO DISALLOWED RS.24,867/- BEING 30% OF THE AGRICULTURAL INCOME DE CLARED BY THE ASSESSEE AT RS.82,892/- BEING THE EXPENSES INCUR RED FOR EARNING SUCH AGRICULTURAL INCOME. THE AO THEREAFTER LEVIED PENALTY ON ACCOUNT OF DIFFERENCE IN LONG TERM CAPITAL GAIN OF RS.6,95,000/- AND DISALLOWANCE OF EXPENSES INCURRED FOR EARNING THE AGRICULTUR AL INCOME ON RS.24,867/-. WE FIND IN APPEAL THE LD.CIT(A) DELETED THE P ENALTY LEVIED ON THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50C AMOUNTING TO RS.2,95,000/-. T HE REVENUE IS NOT IN APPEAL BEFORE US FOR THE SAME. HOWEVER , HE SUSTAINED THE PENALTY LEVIED ON ACCOUNT OF DISALLOWANCE OF E XEMPTION CLAIMED U/S.54 OF THE ACT AND THE ADDITION ON ACCOUNT OF AGRICULTURAL EXPENSES AT RS.24,867/-. 7 ITA NO.187/PN/2016 13. IT IS THE SUBMISSION OF THE ASSESSEE IN THE WRITTEN S UBMISSION THAT PENALTY IS NOT LEVIABLE ON ACCOUNT OF DISALLOWANCE OF EX EMPTION CLAIMED U/S.54 SINCE THE SAME WAS CLAIMED UNDER BONAFIDE BE LIEF AND FULL PARTICULARS WERE GIVEN. FURTHER, NO PENALTY IS LEVIABLE ON ACCOUNT OF ADDITION OF UNEXPLAINED AGRICULTURAL EXPENSES OF RS.24,867/- SINCE THE ADDITION WAS MADE BY THE AO ON ACCOUNT OF WRONG AP PRECIATION OF FACTS. THE ASSESSEE HAS DECLARED THE NET AGRICULTURAL INCO ME, HOWEVER, THE AO INTERPRETED THE SAME AS THE GROSS AGRICULTURAL IN COME AND THEREBY HELD THAT EXPENDITURE HAS NOT BEEN SHOWN BY THE ASSESSE E. 14. SO FAR AS THE LEVY OF PENALTY ON ACCOUNT OF DENIAL OF DEDUCTION U/S.54 IS CONCERNED, WE FIND THE ASSESSEE HAS CLAIMED THE DEDUCTION ON THE GROUND THAT HE HAS PAID AN ADVANCE OF RS.4,00,000 /- FOR PURCHASE OF A HOUSE. ADMITTEDLY, THE ASSESSEE IS NOT E NTITLED TO CLAIM THE SAID DEDUCTION U/S.54 AS THE PLOT SOLD BY THE ASSES SEE AT SANGAMESHWAR, MALEGAON WAS NOT A RESIDENTIAL PROPERTY. F URTHER, THE ASSESSEE IS ALSO NOT ENTITLED TO GET DEDUCTION U/S.54F SIN CE HE OWNS MORE THAN ONE PLOT. HOWEVER, THE QUESTION THAT ARISES H ERE IS AS TO WHETHER FOR CLAIMING THE ABOVE DEDUCTION ERRONEOUSLY, THE ASSESSEE IS LIABLE TO VISIT THE PENALTY PROVISIONS U/S.271(1)(C) OF THE I.T. ACT. THE ASSESSEE IN THE INSTANT CASE ALREADY SUBMITTED BEFORE TH E LOWER AUTHORITIES THAT THE CLAIM WAS MADE UNDER BONAFIDE BELIEF. 15. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT A MERE MAK ING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING THE INACCURATE PARTICULARS REGARDING THE INCOME OF THE AS SESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. THE HONBLE SUPREME COURT IN THE CASE OF PR ICE WATERHOUSE COOPERS PVT. LTD. (SUPRA) HAS HELD THAT PENALT Y 8 ITA NO.187/PN/2016 U/S.271(1)(C) OF THE ACT CANNOT BE LEVIED U/S.271(1)(C) OF THE I. T. ACT FOR A BONAFIDE OR INADVERTENT HUMAN ERROR. 16. IN VIEW OF THE ABOVE DECISIONS OF HONBLE SUPREME COUR T AND CONSIDERING THE FACT THAT THE ASSESSEE IN THE INSTANT CA SE IS ENGAGED IN THE BUSINESS OF TAILORING, WHO IS NOT WELL CONVERSANT WITH TH E COMPLICATED PROVISIONS OF INCOME TAX ACT, WE ARE OF THE CO NSIDERED OPINION THAT WHILE ADDITION MAY BE JUSTIFIED, THE PENALTY IS N OT JUSTIFIED ON ACCOUNT OF DISALLOWANCE OF EXEMPTION CLAIMED U/S.54 OF TH E I.T. ACT AMOUNTING TO RS.4 LAKHS. 17. SO FAR AS THE PENALTY LEVIED ON ACCOUNT OF UNEXPLAINED AGRICULTURAL EXPENSES OF RS.24,867/- IS CONCERNED, WE FIND TH E ASSESSEE HAD SHOWN THE AGRICULTURAL INCOME AS THE NET A GRICULTURAL INCOME WHEREAS THE AO CONSIDERED THE SAME AS GROSS AG RICULTURAL RECEIPTS AND THEREBY MADE DISALLOWANCE OF RS.24,867/- BEIN G 30% OF SUCH AMOUNT AS EXPENDITURE REQUIRED FOR EARNING THE INCO ME. IN ANY CASE, THE DISALLOWANCE IS ON ESTIMATE BASIS ON WHICH PENALTY HAS BEEN LEVIED. THE VARIOUS BENCHES OF THE TRIBUNAL AS WELL AS DIFFERE NT HIGH COURTS ARE TAKING THE CONSISTENT VIEW THAT PENALTY CANN OT BE LEVIED ON ACCOUNT OF ESTIMATED DISALLOWANCE OF EXPENDITURE OR ADDITION OF ESTIMATED INCOME. SINCE THE PENALTY IN THE INSTANT CASE H AS BEEN LEVIED BY DISALLOWING A PART OF THE AGRICULTURAL INCOME AS PR OBABLE EXPENDITURE FOR EARNING SUCH INCOME, THEREFORE, WE ARE OF T HE CONSIDERED OPINION THAT PENALTY IS NOT LEVIABLE ON THE ADDIT ION OF RS.24,867/- ALSO. 18. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT PENALTY IS NOT LEVIABLE U/S.271(1)(C) OF THE I.T. ACT IN THE INSTANT CASE. AC CORDINGLY, 9 ITA NO.187/PN/2016 WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO CANCEL THE PENALTY. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14-07-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 14 TH JULY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-I, NASHIK 4. % S / THE PR.CIT-I, NASHIK 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , // ( + //TRUE COPY // 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE